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August 10, 2023
Federal Student Loans: Return to Repayment
In response to the COVID-19 pandemic, since March 2020,
the accrual of interest, monthly payments, and involuntary
collections have been paused on most federal student loans.
The Fiscal Responsibility Act of 2023 (FRA; P.L. 118-5)
specifies that the interest accrual and monthly payment
pauses shall cease to be effective 60 days after June 30,
2023 (i.e., August 29, 2023). Thus, after over three years of
no interest accrual and no required monthly payments on
most federal student loans, the Department of Education
(ED), contracted student loan servicers, and millions of
federal student loan borrowers are preparing for those
flexibilities to end.
This In Focus provides an overview of ED's plans for
transitioning federal student loan borrowers into repayment
on their federal student loans, and of selected policy issues.
Detailed information about the federal student loan interest
accrual and monthly payment pauses can be found in CRS
Report R46314, Federal Student Loan Debt Relief in the
Context of COVID-19.
Interest Accrual
Interest accrual on ED-held loans has been suspended
during the interest accrual pause. ED has indicated that
interest accrual will resume September 1, 2023. As of
March 31, 2023, at least 38 million student loan recipients
with balances totaling about $1.4 trillion had interest
accrual paused on their loans.
For most borrowers, the interest rate charged on their loans
will be the same as it was before the interest accrual pause
began. Borrowers who consolidated their loans into a Direct
Consolidation Loan during the pause would have interest
rates on their new Consolidation Loans equal to the
weighted average of the interest rates on the loans they
consolidated, with the result rounded up to the next higher
one-eighth of a percentage point.
Monthly Payments
During the payment pause, borrowers have not been
required to make monthly payments on their ED-held
federal student loans. (In practice, ED has placed all such
loans in administrative forbearance.) Borrowers may opt
out of the payment pause. While periods of forbearance do
not typically count toward required payment periods under
various loan forgiveness programs (e.g., Public Service
Loan Forgiveness [PSLF]), payments that would have been
made during the payment pause count toward meeting such
loan forgiveness requirements.
ED has indicated that its contracted loan servicers will
begin sending monthly billing statements to borrowers in
September 2023, and that monthly payments will not be due
until October 2021.
As of May 30, 2023, about 29 million student loan
borrowers with more than $1.1 trillion in ED-held loans had
their monthly payments paused. (Borrowers affected by the
interest accrual pause may not necessarily also be
participating in the payment pause, such as individuals
whose loans are in in-school status.) Of these borrowers,
6.3 million with student loans totaling $264 billion only
have loans that have not yet been placed into a repayment
plan. This may be an indication of borrowers who have
never been in repayment status on their current outstanding
loans and, thus, may not have any previous experience
making payments on these loans.
On-Ramp to Repayment
To facilitate transition into repayment status for borrowers,
ED announced a 12-month on-ramp to repayment, which
is a set of flexibilities to protect the most vulnerable
borrowers from the worst consequences of missed
payments following the payment restart. For October 1,
2023, to September 30, 2024, borrowers who miss monthly
payments due on their loans will not be considered by ED
to be delinquent on those loans, nor will such borrowers be
reported to consumer reporting agencies as delinquent,
placed in default status, or referred to private collection
agencies. Unlike the payment pause, periods of missed
payments will not count toward meeting loan forgiveness
requirements, such as under PSLF.
Saving on Valuable Education (SAVE) Plan
On July 10, 2023, ED published a Final Rule to revise the
current Revised Pay As You Earn (REPAYE) repayment
plan (a type of income-driven repayment [IDR] plan). In
doing so, ED renamed the plan the SAVE plan. In general,
the SAVE plan would result in lower monthly payments for
all qualifying borrowers as compared to current REPAYE
plan rules. Also, after applying a borrower's monthly
payment to their loan, any unpaid accrued interest would
not be charged. Provisions of the plan are to be
implemented on a tiered schedule, with some provisions
effective July 30, 2023, and others effective July 1, 2024.
Provisions implemented in both tiers would generally lower
borrower monthly payments. ED intends to automatically
place all borrowers currently enrolled in the REPAYE
repayment plan into the SAVE plan before the payment
pause ends. Borrowers not already enrolled in the REPAYE
repayment plan may apply for the plan as of July 30, 2023.
Selected [ssues
This section highlights selected policy issues regarding
federal student loan borrowers' upcoming return to
repayment that may be of interest to Congress.](ViewImageLocal?handle=hein.crs/govemmj0001&div=1&collection=&method=preview&ext=.png&size=3)